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NewsMonday, May 7, 2007 3:04 PM CDT
U.S. corn industry cranking up for ethanol boom
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BLOOMINGTON -- From New York to California, and even parts of the Deep South, more acres of corn are expected to be planted this year than at any time since World War II as farmers rush to cash in on the surging demand for ethanol.

“It’s the price. The price is telling you to go toward more corn,” said Mike Olson, who plans to bump corn by 15 percent on his 2,750-acre Illinois farm. He harvested a 50-50 split of corn and soybeans last fall.

After hovering around $2 a bushel for a decade, corn prices have nearly doubled in the last year, pumped to near records by more than 100 ethanol plants that have sprouted as America seeks renewable alternatives to foreign oil. President Bush is talking up alternative fuels and companies like Illinois-based Archer Daniels Midland Co., the biggest ethanol producer in the world, are pouring money into research and development.

On farms across the nation, the lure of more than $100 an acre from corn is too good to pass up in an industry whose fortunes depend on fickle weather, global politics and annual subsidies in the billions.

“I think the country and the leadership of the country have recognized that our addiction to foreign oil is a national security risk that we can’t stomach anymore,” said Mike Baise, a policy expert with the Indiana Farm Bureau. “I believe that we’re going to shift to more bio-based energy in a big way.”

Still, some experts warn that the price has nowhere to go but down if the market is flooded, and not everyone has forgotten how a massive grain deal with the Soviet Union in the early 1970s and the 1996 drought in China shot corn prices to record highs — prices that later wilted.

Keith Blunier, who farms 400 acres in central Illinois, also wonders whether ethanol demand could wane if oil prices drop or other fuel sources prove viable.

“I’ve been through the ‘70s and seen the ups and downs,” said Blunier, who plans to keep his usual split between corn and soybeans on his farm.

For now, the rush is on.

About 90.5 million acres of corn are expected to be planted this year, up 15 percent from 2006 and the most since 95.5 million acres were planted in 1944. Of the 48 states that grow corn, only Massachusetts is expected to plant less this year.

“I think it’s an opportunity for a lot of farmers. It’s one that probably only comes along every 20 or 25 years,” said Terry Francl, senior economist for the American Farm Bureau Federation.

The five top corn-producing states — Iowa, Illinois, Nebraska, Minnesota and Indiana — account for 5.1 million of the projected 12.2 million new acres of corn. To make room, those states will sacrifice 4.3 million acres of soybeans.

The sharpest increases are expected in the land of cotton.

Arkansas, Louisiana and Mississippi this year are expected to boost corn acreage by 133 percent to 195 percent. Combined, the three states are expected to add 1.2 million acres of corn while trimming cotton production by more than a million acres.

“We need a shot in the arm from somewhere and right now it isn’t cotton,” said Billy Joe Ragland, whose main crop will be corn this year on his farm near Bentonia, Miss. After drought and two rounds of hurricanes over the last three years, he said, “we’ve got a chance to make a little money for a change.”

The USDA estimates cotton acreage will drop 20 percent nationwide this year and soybeans will drop 11 percent. Agriculture Secretary Mike Johanns has downplayed any impact on food costs, saying the USDA anticipates typical 2 percent to 3 percent increases that can be pegged to “a dozen different factors.”

Still, there are plenty of unknowns as ethanol commands a growing share of a U.S. corn crop that also feeds cattle, hogs and poultry, and is a food additive that goes into everything from breakfast cereals to candy and beer.

Farm officials say the livestock and poultry industries, which historically use about half the nation’s corn crop, will likely try different feeding options or selling animals at lower weights before passing along higher prices to consumers.

“It’s not going to happen overnight,” said Dale Lattz, a farm management specialist with the University of Illinois extension service. “It would take a year or two for significant effects.”

And some contend there will be enough corn for everyone if the planting forecast bears out.

“I think the market got the acres it really wanted to satisfy this global demand,” said Jim Bower, owner and president of Bower Trading Inc., a Lafayette, Ind.-based commodities brokerage.

Whether the harvest meets everyone’s needs will depend on the weather, and some farmers may choose other crops depending on the planting season forecasts. Analysts also say ethanol-driven demand coupled with the weather uncertainties will make for a volatile corn market.

Many farmers and analysts say corn prices likely won’t dip below $3 per bushel this year due to ethanol demand that is expected to consume 3.2 billion bushels of corn, up from 2.1 billion bushels last year.

The American Farm Bureau’s Francl predicts prices will stay in the $3 to $5 per bushel range for the next four to five years. Others suggest farmers will be able to adapt if a market emerges for non-corn biofuels.

“If federal policy doesn’t change and oil prices stay in the $50 to $65 range, this isn’t going to go away for a while,” said Bruce Babcock, director of Iowa State University’s Center for Agricultural and Rural Development.

Steve Stevens plans about 1,200 acres of corn on a 4,500-acre farm in southeast Arkansas, where cotton and rice have been staples since his father homesteaded the land 70 years ago. Since then, only 100 acres of corn have ever grown there, in a small field planted two years ago when pest problems ruled out cotton.

“It’s scary,” Stevens said of his switch to corn. “We know cotton, we’ve done it for a long time. We don’t know corn.”

Even some farmers familiar with corn aren’t changing. Among them is Vance Bauer, who will keep a 50-50 mix of corn and soybeans this year on his 1,800-acre farm near Gowrie, Iowa.

“I’m very optimistic about where we’re headed, but I don’t know that I’d put myself out on a limb,” he said. “I don’t want to put all my eggs in one basket.”

Take a look
Illinois farmer Mike Olson looks out over land he farms Thursday, April 5, 2007, in McLean, Ill. Hoping to cash in on the surging demand for ethanol, Olson plans to plant 15 percent more corn on the 2,750 acres he will plant this year. (AP Photo/M. Spencer Green)
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Reader comments on this story - 18 total

Note: All views and opinions expressed in reader comments are solely those of the individual submitting the comment, and not those of the Pantagraph or its staff.

No Spraying, No Crop wrote on May 8, 2007 3:33 AM:

" What happens when the crop can't be sprayed because your neighbor exercised his "right" to put up a wind turbine on his property and you have to pay twice as much to spray by air or be unable to protect your crop at all, as testified to at the recent McLean County Zoning Board hearings on the effects of wind turbines on farming in McLean County. Don't believe it when the wind company says only 1/3 acre taken out of production per turbine. At Paw Paw, there is NO aerial application within the boundaries of the wind farm. "

To Ethanol Scam wrote on May 7, 2007 5:23 PM:

" Wouldn't paying more now be worth it if it sets up the infrastructure (distribution channels, etc.) for cheaper fuel mixes later? As technology advances, maybe other crops, mixes, etc will result. If we can increase our self-sufficiency by reducing the amount of foreign oil we buy, maybe the temporary increased cost is worth it. "

Ethanol Scam wrote on May 7, 2007 4:05 PM:

" It's been repeatedly documented and reported that there are marginal if any "energy gains" from using ethanol instead of gas. In other words, it takes nearly as much energy to create the ethanol as it produces once created. It is also subsidized by the govt, so it's not cheaper than gas either. The whole thing is a scam. Is anyone surprised that ADM, the largest producer of ethanol, is also one of the largest donors to both parties? "

What A Great Idea... wrote on May 7, 2007 3:07 PM:

" Let's burn our food in our cars. Then we can complain when food prices go up. "

To "to To !!" wrote on May 7, 2007 1:27 PM:

" At least you have a choice who you want to support even IF the cost/benefit is not the same. "

AJ wrote on May 7, 2007 10:16 AM:

" To 'corn price up' You have absolutely no clue on how farming is done anymore do you? If you did, you'd realize that most farmers are paying very high cash rent rates because they don't own their own ground. Very few farmers in East Central IL farm their own ground. Take an ag class before you post on this kind of topic. "

to To !! wrote on May 7, 2007 10:16 AM:

" 10% ethanol is great because it gives my car 10% lower gas mileage and I have to fill up more. Thanks, guys! "

To !! wrote on May 7, 2007 9:01 AM:

" Cars can run on ethanol (10%) and people should start using this instead of foreign oil- It is the E85 that you need special cars for- "

To ? wrote on May 7, 2007 8:23 AM:

" What happens if the sun doesn't come out for 3 months and all photosysthis stops? "

corn price up wrote on May 7, 2007 7:23 AM:

" now is time to stop giving farmers money. let them live on what they grow not what the government gives them. if you figure the value of their land, machinery, etc. they make millions per year. just most of it they can right off on their taxes and than the government gives out. "

!! wrote on May 7, 2007 7:21 AM:

" first the cars on the road have to beable to burn this fuel. very few can now and it will take years to get every car running it. "

To awesome wrote on May 7, 2007 6:58 AM:

" The cost of grain in cereal, bread, and other food items is minimal. If food prices go up, it's largely due to the processor using increased grain costs as an excuse. "

To:? wrote on May 6, 2007 11:26 PM:

" Perhaps we use that water to hose down the protesters at the 2008 National Democratic Convention. "

Awesome wrote on May 6, 2007 9:35 PM:

" Food prices on their way up! Right along with gas prices, property taxes, electricity, college tuition... and they say there is no inflation! It would be nice if government would subsidize something decent like battery technology, solar power, fusion, etc. but instead, we get pandering to the middle America god and soil types. Don't get me wrong, I love their food, but they don't need to be in the fuel business, too. "

FINALLY wrote on May 6, 2007 7:55 PM:

" CAN WE NOW QUIT SUBSIDIZING,OR IS THAT GOING TO BE ANOTHER UNTOUCHABLE ENTITLEMENT? CAN THE GOVERNMENT EVER GET OUT OF THE WAY? FOOD PRODUCTS PROBABLY WOULD HAVE BEEN HIGHER,BUT,AT LEAST YOU KNOW WHAT YOUR ACTUALY PAYING FOR SOMETHING. "

Even A Flash In The Pan wrote on May 6, 2007 7:20 PM:

" is one more flash in the pan than farmers have had - really - since World War II. And decoupling any substantial amount of energy usage from the finite reserves of the volatile Middle East is no bad thing. As with the unfavorable trade imbalance with the Pacific Rim, patriotism costs more ..... as E85 will. "

all wrote on May 6, 2007 6:52 PM:

" it takes is a bad bug year to eat up the corn silks like the japanese beetles did last year, & poof, no corn crop "

? wrote on May 6, 2007 2:20 PM:

" what happens to the corn if the incesticide used to controll root worms stops killing them. than the price of fuel from corn sky rockets and we are all back in the same boat. remember these plants will use millions of gallons of water per day. will drinking water be there from wells or drained from the ground by these plants? just something to think about. "

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